Real estate investment at record levels

London stays top as an investment location, while New York falls. Sebastian Shehadi reports.

Despite geopolitical uncertainty and a slowing economic cycle, global investment in commercial real estate hit a new record high of $1800bn, an 18% year-on-year increase, while London strengthened its position as the city attracting most overseas investment, according to Cushman & Wakefield’s ‘Winning in Growth Cities’ report, released at the opening of Expo Real, an international real estate fair held in Munich every year.

At a regional level, total transaction growth in North America was tepid, increasing 0.6% year-on-year. Elsewhere, however, volumes have improved at their strongest rate in three years. Totals in the Asia-Pacific region are up 32% on the year, while European transaction growth has increased by more than 16%.

Asian investors have led the 18% global increase in investment in real estate this year, accounting for 52% of all activity, according to Cushman & Wakefield’s report. “There is no shortage of capital targeting real estate across myriad geographies and risk profiles. Indeed, we are seeing many investors increasing their allocations to real estate and they are evolving their strategies to allow for variable supply and risk tolerances,” said Carlo Barel di Sant’Albano, the company’s head of global capital markets.

Cities in the US dominated the top 10 cities for overall investment, with six representatives, while Europe and Asia accounted for two each.

New York retained top spot as the largest market in the world by volume, followed by Los Angeles and London, with Paris rising to take fourth spot ahead of Hong Kong.

However, for the first time on record, New York is not in the global top five for international investment, falling from second to sixth place. “This is partly being driven by geopolitical tensions causing a pull-back in investment from some players but is still more a product of a highly competitive and strongly priced market,” said the report.

For the ninth time in 10 years, London took first place among international buyers, growing 22% since last year due to to a number of high-profile office transactions, and despite political uncertainty surrounding the UK's exit from the EU. Transaction volumes into the city increased by 47% over the year to $10.9bn, with Asian investors providing the lion’s share of capital; offices were overwhelming the target for these deals, accounting for 94% of transactions.

The strongest Asian market for international buyers was Hong Kong, up 68% compared with 2017, moving up three places to become the first city from the region to make the global top five for three years. "[This is] the result of capital controls encouraging mainland Chinese investors to concentrate their allocations closer to home, resulting in continental investment in the city rising by 259% year-on-year,” said the report. Asian cities account for three of the top 10 in 2018 compared with none the year before, as Shanghai and Tokyo improved as targets for cross-border capital.

Toronto was the first Canadian city to enter the top 25 in five years, with a 50% increase in volumes by 50%. “Beyond these big movers the make-up of the top 25 has changed very little, with their market share representing 49% of total volumes, down from 50% at the same point last year,” said the report.

Europe accounted for four of the top five spots for international capital, with Paris and Amsterdam retaining third and fourth place for the second year and Madrid making the top five for the first time since 2009. The only German city in the top 10 was Berlin, marking a change from the country’s dominance in 2017 when three cities appeared, the most it has ever had. “However, German cities continue to see very buoyant levels of demand and maintained a healthy representation in the top 25 city targets for cross-border investors,” explained the report.

Greenfield foreign investment into the real estate sector grew by 12% year-on-year compared with the period August 2016 to August 2017, going from $118bn to £134bn, according to fDi Markets.

With more than 2040 exhibitors from more than 35 countries, Expo Real 2018 beat the record numbers reported in 2017, when the trade fair achieved significant growth compared with previous years

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